Wednesday, April 25, 2018

The Flawed Equal Pay Laws Adopted by Massachusetts and New Jersey

Aside from sexual harassment, the hot EEO issue of the moment is equal pay. The Ninth Circuit's recent decision prohibiting employers from relying on salary history may be an outlier when it comes to interpreting the federal Equal Pay Act, but states and local governments have been proceeding full speed ahead in adopting their own measures. Unfortunately, the approaches they have taken are all over the place. This post looks briefly at the measures adopted by Massachusetts and New Jersey, which are both significantly flawed in their own way.

The Massachusetts law prohibits employers from paying workers of the opposite sex performing substantially similar work different wages unless justified by certain specified exceptions. Since the federal Equal Pay Act only applies to workers performing "substantially equal" work, the Massachusetts law may make it somewhat easier for a plaintiff to establish a prima facie case. Much more significant is the narrow list of specific exceptions. By contrast, the federal Equal Pay Act states that an employer may rely on any factor other than sex to justify a pay discrepancy.

One of the risks in limiting employers to a narrow set of exceptions is that legislators are bound to forget something important. Consider that the guidance issued by the Massachusetts Office of the Attorney General explains that an employer may pay part-time and full-time workers in the same job different hourly rates. A pay disparity based on part-time status, however, does not fit within any of the identified exceptions in the Massachusetts law -- seniority; merit system; system based on quality of quantity of production, sales, or revenue; geographic location; education, training, or experience; or travel requirements. There is absolutely no question that these are the only recognized exceptions, and I don't see how you could reasonably argue that part-time status fits under any of them. If the current Massachusetts AG can make up a new exception out of whole cloth, then perhaps later AGs can tack on their own exceptions. I don't mean to contend that part-time status is never a legitimate reason for paying someone at a lower hourly rate, though it's notable that women continue to be much more likely than men to work part time. Rather, I'm pointing out that the Massachusetts law seems to be so poorly thought out that the AG is already having to adopt an interpretation that fails the laugh test. 

The New Jersey law also requires equal pay for workers performing "substantially equal work," but unlike the Massachusetts law, it provides an open-ended exception. The law requires that the employer establish that a pay discrepancy is based on a factor that is "job-related with respect to the position in question and based on a legitimate business necessity."  Moreover, the employer cannot rely on the factor "if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing the wage differential."

This standard is a modification of the employer defense in a disparate impact claim, where a challenged screening practice disproportionately screens out members of a protected group. While it is a good fit in that context, it is not well-suited for evaluating the legitimacy of a pay disparity. If an employer adopts a test to screen out unqualified job applicants and the test disproportionately screens out women, for instance, the employer might try to establish business necessity by showing that the test is a fair measure of whether someone would be able to perform the job in a satisfactory manner. By contrast, it is not clear when an employer would have a business need to pay someone more because he has better job-related qualifications than a female employee doing the same job. Why couldn't the employer just pay the female employee as much as the male without lowering the male employee's pay? And what for God's sake is an alternative business practice that serves the same business purpose? In the disparate impact context, an alternative is a measure that allows an employer to screen out unsatisfactory applicants without disproportionately excluding a protected class. There is no obvious counterpart in the equal pay context. By importing disparate impact principles into the equal pay context, the New Jersey legislature was obviously aiming to strengthen equal pay protections, but in trying to achieve that goal, it adopted a standard that will only leave employers and courts scratching their heads.

Understandably, the New Jersey legislature may have wanted to adopt a more limited exception than the broad catchall exception under the federal Equal Pay Act. Rather than trying to fit a square peg into a round hole, however, the state could have looked to EEOC guidance and federal case law that has interpreted the federal Equal Pay Act narrowly to require an employer to show that a pay discrepancy is based on a factor that is related to the job or is based on another acceptable business reason.

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.